Executive Coaching & Consulting

Edge Blur: What it is and what it’s costing you

There is a tendency to believe that what other people, departments, and companies do is easier than what we do. This is a common psychological phenomenon. When it happens it business, though, our focus softens around the edges (what I call edge blur), and we start devoting inordinate time to areas where we are capable but not best-of-class.

The impact of this is that companies and people waste energy, internally and externally, trying to reinvent the wheel, rather than partnering, outsourcing, or delegating to others who are already rolling along nicely. Nowhere is this more evident than in the high-stakes, fast moving world of the tech industry. Despite being some of the most valuable companies on the planet, many of these companies appear to suffering from classic edge blur.

Blurred vision, full throttle

Apple is class-leading in technology-focused industrial design, UI, innovation, professional media distribution, and marketing (all separate capabilities). But they are also-rans when it comes to web services. For the past 5 years, their hardware has been so sexy and compelling, that consumers (even some enterprises) don’t mind the walled garden that surrounds core media content. Apple’s creation of and reliance on iTunes as the centerpiece of it’s unified hardware strategy was smart early on, but as the cloud has become more ubiquitous, Apple needs to focus on better web services to provide luxury data experience commensurate with it’s hardware experience. Are they likely to do that? Apple is so secretive that it’s hard to tell. Their past history indicates a much stronger focus on products than web services, but then they took the world by surprise with the iPhone, too. That move, however, outsourced much of the heavy services lifting to AT&T. My gut tells me that Steve Jobs and Tim Cook tried to make the pivot towards the web with MobileMe (a disaster), then later iCloud and it’s related services (better, but still lacking). Hopefully, Cook’s got a crack skunk works team trying to scale Apple’s giant data center in North Carolina so that future Apple cloud services are every bit as sexy as their hardware. But somehow, I doubt it.

Microsoft owns the traditional enterprise software space, both as a platform, and in many of the niche products where they compete- databases, CMS, web servers, development languages, and office productivity tools. But until recently, they have been non-existent as a true web services provider (other than Hotmail). The Windows UI is stodgy and stale, and the company’s hardware offerings have fallen flat. Windows 8’s “metro” UI, their soft acquisition of Nokia, and the new Surface tablet PC have disappointed so far, but still may change all of this. Never count out Redmond!

Amazon and Facebook, major players from a tech gravitas and market cap perspective, are making similar myopic decisions, despite their success in online e-Commerce and social media, respectively. E-bay, for example, is the #1 e-tailer in India, a huge up-and-coming marketplace, much to Amazon’s cost. Amazon’s position as an aggregator of long-tail content is probably it’s most unique position at the moment, though it’s under assault from Apple, Netflix, and Google. Amazon’s most defendable and profitable business unit is probably it’s infrastructure rentals, the Amazon Web Services (AWS) and S3 managed hardware, which competes with Rackspace and many smaller players.

Facebook, though a ubiquitous presence, still hasn’t quite figured out how to succeed with a third-party pay advertising model, even as it’s online game platforms are collapsing, and Zuckerberg has painted himself into a corner by promising that Facebook will always be free to users. Cheryl Sandberg, one of the most media-savvy COOs in the world, might have a clearer vision about how to monetize Facebook, as she did Google. She also might make a better CEO than Mark Zuckerberg.

Dell & HP, America’s last major PC-focused hardware makers, are suffering major contractions in their core markets, and are searching for the IBM-style “pivot” that will allow them to remain relevant to the enterprise. Both have essentially become irrelevant to consumers, though neither CEO will admit it. HP still leads in printers, including consumer printers, but the business model here is selling ink, not hardware, similar to the way carriers subsidize phones to secure monthly usage fees. That puts HP squarely in the “commodity” business. With it’s single-digit stock price, Dell is not much better off, struggling to charge premium-brand prices for commodity hardware, and acquiring companies left and right as they search for the next big thing. Dell’s recent privatization notwithstanding, both companies will need to radically rethink their business models for the next decade if they are to thrive again, or even survive, for that matter.

Google is class-leading in web services, user-generated content, search, and search advertising. It’s also an amazing R&D company, on a par with 3M and the famed Xerox PARC. Many of their innovations (like Gmail) are now returning revenue, and are cornerstones of the company’s long-term growth strategy. But Google is an also-ran when it comes to UI look-and-feel, hardware, and non-search monetization. They have, though, gotten better in the last three months with the promotion of a new UI/UX chief, and poaching several designers from Apple. Actually, Google is getting better at design faster than Apple is getting better at “the cloud.” That spells trouble for Apple. Google’s got a low-cost, proven business model with advertising, and is slowly trickling in additional revenue from Google apps, Nexus and Chrome book device sales, licensing agreements, and more. It’s a solid, slow-n-steady growth strategy. Of all the companies on this list, Google seems the best positioned for sustainable growth.

Clear line of sight

To prevent edge blur, CEOs must be aware of what’s on the periphery, and be prepared to respond, not merely to launch a line-extension for what seems like (but often isn’t) a quick and easy revenue grab. Just as the threats to a company’s health may change over the years, so, too will it’s strengths. Companies often end up leaders in fields other than the ones they started in. But this only happens when executives recognize the real, not ostensible might of the organization.

IBM used a strong understanding of and relationships to big business (it’s real value proposition) to pivot into a consulting services company. Likewise, leaders of modern companies be willing to see clearly what’s at stake and what must be done, no matter how taboo. In 1980, who could have imagined that IBM would no longer be a hardware company?!

It’s no mistake that one of the most successful strategic pivots of a Fortune 500 company required someone whose face was not pressed up against the industry glass. CEO Lou Gerstner ran RJR Nabisco, was an exec at American Express, and McKinsey & Co. consulting, as well as private equity firms. Bringing in a fresh perspective is often the best way to avoid edge blur and chart a clear path forward.